Source: BP extending its U.S. natural gas reach

by Houston ChronicleMidland Reporter-Telegram

Published 6:00 pm, Saturday, March 13, 2010

By Brett Clanton

Houston Chronicle

BP has made a joint- venture deal with privately held Lewis Energy Group that will expand the British oil giant's position in the U.S. natural gas business and find it entering a fast-emerging field in South Texas, according to a person familiar with the situation.

Under the deal, BP will take a 50 percent stake in 80,000 acres of the Eagle Ford Shale play and is acquiring additional acreage in smaller pending deals, the person said.

Daren Beaudo, a BP spokesman in Houston, declined to comment. Officials with San Antonio-based Lewis could not be reached for comment.

The deal would be the latest in a string of similar moves by major oil companies to enter or expand in unconventional rock formations in the U.S., where huge amounts of natural gas have been discovered in recent years.

In December, Exxon Mobil Corp. said it would acquire Fort Worth's XTO Energy in a deal valued at $41 billion. A month later, France's Total agreed to pay $2.3 billion for 25 percent of Chesapeake Energy Corp.'s acreage in the Barnett Shale play in North Texas, and the companies said they may jointly develop acreage in the Eagle Ford Shale and in several Canadian natural gas plays.

Royal Dutch Shell, Norway's Statoil and others have also written big checks for access to North American shale plays, and so has BP.

In 2008, BP did two deals with Oklahoma City-based Chesapeake, worth nearly $3.7 billion, that gave it access to unconventional reserves in Oklahoma and Arkansas.

Oil companies are looking to expand holdings of natural gas amid stricter environmental laws and forecasts that use of cleaner-burning fuel will grow in coming years.

The Eagle Ford, which starts near the Mexican border and extends east below San Antonio across a string of counties, is considered one of the hottest unconventional gas prospects in North America. But exploration there is in earlier stages than other large U.S. shale plays.